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New Alitalia to Exit SkyTeam Transatlantic Joint Venture, Expand Long-Haul Fleet
After its original decision in March to re-nationalize the Italian flag carrier, Alitalia, the Italian government has taken all the necessary steps to transition all the assets into the new company that will be owned by Italian taxpayers who, during the past 12 years, have injected over 7 billion euros into the coffers of the ailing airline.
The decision was originally communicated in March following the dramatic drop in demand caused by the COVID-19 pandemic.
Last week, Stefano Patuanelli, Italy’s Minister for Economic Development, revealed a few more details about the operation, telling the public, “There have been rumors published on some newspapers regarding the future size of Alitalia. Those rumors hinted that the new Alitalia will be a very small carrier, but that is not correct. We are planning to operate approximately 90 aircraft from the 113 that were part of the fleet at the beginning of the year.”
Patuanelli confirmed that the majority of the aircraft will be leased and that only nine of them will be owned outright. Currently, there are two Airbus A330-200 and one Boeing 777-300ER that will be phased out of the 93-strong fleet currently on the airline’s books.
The contracts for the aircraft currently on lease are being transferred to the new company. The management is looking to obtain a deferral to May 2021 for some of the payments and, where possible, renegotiate the leasing rates that are considered to be above the current market level. A report from Italian newspaper Corriere della Sera revealed that Alitalia was paying rates between 40 and 60 percent higher than average market rates for its short-haul and long-haul aircraft, probably due to its poor financial performance during the last decade.
“It will be fundamental to define the turnaround plan for the company,” Patuanelli said, “at the moment the special administrators are planning to redesign the fleet in order to have at least 30 percent of long-haul aircraft.”
Presently, the Alitalia fleet includes 12 Airbus A330-200 and 11 Boeing 777-200ER, which means the carrier will be looking at leasing at least six or seven more long-haul units.
The carrier will leave the SkyTeam transatlantic joint venture on May 21, and therefore will be looking at different options with regards to alliances. In the recent past, Alitalia was limited in its expansion plans on North Atlantic routes by its fellow SkyTeam members, especially Air France-KLM and Delta Air Lines. However, the airline could rely on the revenue from the joint venture that would see the Italian carrier receive a percentage of the transatlantic revenue deriving from tickets issued in Italy, regardless of the issuing or operating carrier.
That revenue stream will now disappear, but Alitalia will be free to pursue its own commercial strategy or to join another alliance or joint venture. All other SkyTeam transatlantic carriers will operate under a newly-created joint venture that now also includes Virgin Atlantic, in which Delta Air Lines owns a 49 percent stake.
What seems to be counter-intuitive is the decision to shape the fleet of the new carrier before defining a strategic plan for the future or finding an industrial partner to fight in a market more and more dominated by mega-carriers based in North America, Europe and Asia. Logic would suggest that a carrier would decide its key strategy first and procure the tools to do it later, not vice-versa.
Patuanelli has also hinted that not all 11,600 employees of the old Alitalia may be able to be included in the new company.
“We have already opened the dialogue with the unions, but it is very difficult to see a scenario with zero layoffs” Patuanelli, said. He also added that unions will almost certainly have a seat on the board of the new airline. Currently, 6,800 employees are furloughed with 80 percent of their current salary paid by the government, in compliance with the Italian law regulating the air transport industry employment contracts.
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